ASEAN, South Korea to free up trade

South Korea and ASEAN countries will start cutting tariffs on merchandise trade by Jan. 1, 2007

South Korea and ASEAN countries will start cutting tariffs on merchandise trade by Jan. 1, 2007, but talks with the group's key member Thailand remains stalled amid a dispute over rice, ministers said on Thursday.

The 10-member Association of Southeast Asian Nations except Thailand signed an agreement in May to start freeing up trade in goods as part of plans to create a free trade area by 2012. Thailand, the world's top rice exporter, refused to join to protest South Korea's insistence on excluding rice.

"Rice is an extremely sensitive product for us. This is obviously a very difficult issue," South Korean Trade Minister Kim Hyun-chong told a news conference after talks with his ASEAN counterparts.

Kim urged Thailand to accept concessions that have been agreed upon by South Korea and the other nine ASEAN members in the pact. "That should be the basis for us to conduct negotiations. Both sides will be working to try to conclude negotiations as soon as possible, he said, expressing hope that it could be resolved within a year so that Thailand can come on board.

Thai officials were not immediately available for comment. Talks between the two sides have also been stalled by Thailand's political crisis, officials said.

Apart from Thailand, ASEAN also groups Brunei, Indonesia, Laos, Cambodia, Malaysia, Myanmar, the Philippines, Singapore and Vietnam. Malaysian Trade Minister Rafidah Aziz said the nine other ASEAN countries are in the process of ratifying the trade in goods agreement and both sides expect to implement the pact by Jan. 1. She said negotiations to liberalize trade in services and investment are ongoing and could hopefully be concluded by the year-end.

The two sides will gradually cut tariffs on merchandize goods starting next year, with all duties to be fully eliminated by 2010. By 2012, the two sides hope to remove barriers to services and investment to create a broad free trade area.

"This obviously represents a giant step forward," said Kim, the South Korean minister. "For the services and investment component, we will be working very hard to finish it. Both sides will exercise flexibility to accommodate each other's needs."

Kim said ASEAN has signed an agreement to support a joint North-South industrial complex in North Korea's western border city of Kaesong, which is developed to help provide funds for the cash-strapped communist north.

"ASEAN will accept 100 products (manufactured) there as South Korean origin," he said. "It is an important step in integrating North Korea into the international community."

In a joint statement, the ministers said trade flows between ASEAN and South Korea rose 15 percent on-year to surpass US$50 billion (euro42 billion) last year. South Korea remains among top 10 investors in the region, investing US$628 million (euro523 million) in 2005.

The ministers said the ASEAN-South Korea agreement in trade in goods would further invigorate trade and investment flows and stimulate greater interest from investors. They urged Thailand and South Korea to continue consultations to overcome their differences.